even as Enforcement Directorate (ED) has searched one of the directors of Zanmai Lab, which owns the cryptocurrency exchange wazirx, there are other cryptocurrency exchanges that are under the ED lens. According to a report by ET, the authority is probing alleged money laundering cases worth over Rs 1,000 crore, involving at least 10 crypto exchanges, most of which have links to China.
The investigation has revealed instances where exchanges were approached to buy crypto coins worth over Rs 100 crore and send crypto coins to international wallets. According to reports quoting sources, the exchanges did not conduct any increased scrutiny and did not even collect suspicious transaction reports (STRs).
Also next week, the ED is likely to interrogate officials of the crypto exchanges under investigation. “While so far the agency has frozen WazirX’s accounts, similar transactions have taken place on other exchanges and they have been asked to join the investigation,” ET report quoted an official as saying.
It also said that in many cases the KYC details were also questionable. A person with KYC has nothing to do with the transaction in many cases.
The ED is conducting money laundering investigations against several Indian NBFC companies and their fintech partners for extortionate lending practices.
The agency conducted raids on the director of Janmay Lab in Hyderabad on August 3 and alleged that he was “non-cooperative”. Its investigation against the crypto exchange is linked to the ongoing investigation against several Chinese loan apps (mobile applications) operating in India. The agency accused WazirX of alleged violations of the Foreign Exchange Management Act (FEMA) last year.
“It was found that WazirX Director Samir Mhatre has full access to WazirX’s database, but is yet to provide details of transactions relating to crypto assets purchased from the proceeds of the instant loan app fraud offense. Loose KYC norms, lax regulatory control of transactions between WazirX and Binance, non-recording of transactions on the block chain to save costs and non-recording of KYC of opposite wallets have ensured that WazirX no accounts Unable to provide missing crypto assets,” alleged the ED in a statement.
WazirX said in a statement that it is a platform operated by Zanmai Labs and Binance. “Zanmai Labs has an intolerant policy towards any illegal activities using WazirX. User agrees to use WazirX in accordance with applicable law in this Agreement. Users sign up on WazirX only after completing the KYC process including submission of proof of address and identity. Our KYC/AML rules and procedures are publicly available on the platform. For each transaction, we are able to furnish the KYC details of the respective user. We do not accept any cash transactions. We have fully cooperated with the Enforcement Directorate (ED) for several days and have answered all their queries in a completely and transparent manner.”
It added that ED is probing transactions of certain users and Zanmai Labs has no relation with such users and is unaware of the purpose of their transactions. Zanmai Labs is in the position of any other intermediary whose platform may be misused.
WazirX also said that there appears to be a major misunderstanding between WazirX and Binance regarding off-chain transactions. Off-chain transactions between WazirX and Binance can only be performed by a user between his own account on the two platforms. Hence, KYC details are also available for all off-chain transfers [and have been submitted to the ED when requested], If the accounts are not KYC then off-chain withdrawals also cannot happen. Law enforcement agencies (LEAs) can obtain complete information about accounts involved in off-chain transfers.
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